British PM on India trade trip as graft scandal erupts

MUMBAI (Reuters) - British Prime Minister David Cameron flew into India on Monday promising to try to revive interest in the Eurofighter even though New Delhi has chosen a French-made rival and as a graft scandal is engulfing an Anglo-Italian helicopter deal.

Making his second visit to India as prime minister, Cameron's trip comes days after a similar trade mission by French President Francois Hollande, underlining how Europe's debt-stricken states are competing to tap into one of the world's fastest-growing economies.

Cameron's delegation, which includes representatives of more than 100 companies, is the biggest taken abroad by a British premier and includes four ministers and nine MPs.

But the timing of the trip is not ideal. India said on Friday it wanted to cancel a $750 million deal for a dozen helicopters made by AgustaWestland, the Anglo-Italian subsidiary of Italy's Finmeccanica(SIFI.MI), over bribery claims.

That will not make Cameron's job of persuading India to buy more civil and military hardware easier, and Indian officials have told the local press they intend to press Cameron for "a fully-fledged report" on what Britain knows about the scandal.

Britain has said it wants to wait until the end of the Italian investigation before commenting in full, but has given India an interim report on the subject.

"This is something for the Italian and Indian authorities to deal with and I'm sure they will," Cameron told reporters on Monday, saying issues had been raised that needed to be settled.

Cameron said he would tell the Indian government that the Eurofighter jet, which is partly built in Britain, remains an attractive option if India decides to review a multi-billion dollar deal to buy 126 French-made Rafale fighters. New Delhi rejected the Eurofighter last year.

"(Eurofighter) Typhoon is a superior aircraft," he said, adding that the consortium that built it had said it would "look again" at the price. Such a deal could involve technology transfer and industrial participation, he said. "I will make clear the Typhoon is still available."

A British government source said on Friday that London had noted that Hollande hadn't finalised the Rafale fighter jet deal during his own trip.

"LEADING PARTNER"

Cameron told his hosts they should open up their economy because Britain had done the same for Indian firms. He said he was proud of the fact that companies like Tata group, the owner Jaguar Land Rover, had such a strong foothold in the British economy, but said he expected a reciprocal arrangement.

"Britain is an open economy and we encourage that investment," he said. "I think, in return, we should be having a conversation about opening up the Indian economy, making it easier to do business here, allowing insurance and banking companies to do more foreign direct investment."

India still had outdated rules and regulations, Cameron complained.

Investors have been clamouring for years for India to open up Asia's third-largest economy to more foreign investment. But their entreaties have been resisted by Indian opposition groups worried about potential damage to home-grown businesses.

At a time when Britain's government is struggling to get its economy growing, officials see India, projected to become the world's third largest economy by 2050, as a key strategic partner in what Cameron has called a "global race".

"India is going to be one of the leading nations in this century and we want to be your partner," Cameron told Indian workers at Hindustan Unilever Ltd.

Cameron's visit to India, which won independence from Britain in 1947 and whose colonial history remains a sensitive subject for many Indians, will take in Mumbai and New Delhi.

Cameron says the two countries enjoy a "special relationship", a term usually reserved for Britain's ties with the United States, but it is a relationship undergoing profound change. For now, Britain's economy is the sixth largest in the world and India's the 10th. But India is forecast to overtake its old colonial master in the decades ahead.

In a nod to how the relationship is evolving, Britain will stop giving India aid after 2015.

Cameron is expected to lobby India to do more to allow foreign retailers such as Britain's Tesco(TSCO.L) to open stores in the country.

New Delhi changed the rules last year to allow foreign chains to operate in India but attached policy riders including obligations over local sourcing, mandatory investment in local infrastructure and restrictions on what goods could be sold.

India is forecast to spend $1 trillion in the next five years on infrastructure and Britain is hoping its firms may win some of those contracts.

Cameron said he wanted British firms to help India develop new cities and districts along a 1,000 km (600 mile) corridor between Mumbai and Bangalore, generating investment projects worth up to $25 billion.

Some British companies have run into problems in the past. Mobile phone operator Vodafone has repeatedly clashed with the Indian authorities over taxes and oil company Royal Dutch/Shell(RDSa.L) has asked the British government to raise a tax dispute it has with India during Cameron's visit.

He will meet his Indian counterpart, Manmohan Singh, as well as the president. His office said business deals that will be announced during the trip would create 500 British jobs and safeguard a further 2,000.